As Amazon’s purchase of Whole Foods dominates the global headlines with pundits and analysts galore speculating about what this will mean for the grocery, nay entire retail landscape, those of us from a data background already have a pretty good idea.
Many see the move as a play for Amazon’s market share; essentially using Whole Foods as a distribution network. But where the real danger for Walmart, Kroger and CostCo et al lies is in the customer data and its Prime offering. A large part of Amazon’s success is down to the fact that at its heart it is essentially a database management system – a very, very large and complex one. It has one of the most sophisticated approaches to customer data in the World and all of its strategic business decisions are based on bolstering that data engine as its customer data earns its billions of dollars each year. Already it has filed a patent for predictive delivery whereby it will ship goods it thinks certain customers will buy to locations near their homes or work so that when they do buy the item will be delivered within the hour.
Whilst the big grocers all have very sophisticated loyalty schemes which prove that they know and have relationships with their customers, their flaw is that they have been designed around a supermarket mindset of driving repeat custom and protecting market share. Clubcard in the UK for instance is hailed as the most successful scheme in existence, and so it should be. It has delivered exactly what it was designed to do. But what it doesn’t do is create a joined up customer journey and nor does Kroger’s scheme, Walmart’s scheme or any other grocery loyalty programme. They are all very one dimensional whilst Amazon Prime is all encompassing across every known touchpoint, device and intrinsically interwoven into the customer’s life. It was built with a forward thinking mindset and the view that any market entry was possible. Amazon’s acquisition of Whole Foods not only adds to this data ecosystem but is also a very easy way to add millions of dollars of revenue to Prime’s bottom line – over half of America’s high earners are already Prime subscribers spending an average of $1,000 a year through the service and Whole Food’s customers spend around $6,000 per year on groceries…
As they say in The States – You do the math!
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